The Real Deal New York

So what if prices are going up?

November 16, 2007
By Tom Acitelli

Much ado was made about fourth quarter 2005 reports that showed Manhattan was still, for all the news of cooling prices in the latter half of last year, one of the most expensive residential markets on Earth. The average sales price for an apartment in the borough remained above $1 million, and the median sales price at more than $750,000.

But reports also showed that sales activity dropped off in the final months of 2005, presenting real estate professionals with a conundrum: What good is it if the sales prices are high and not much selling is going on?

“[Brokers] love markets going up and down,” said Neil Binder, co-founder and principal of Bellmarc Realty. “We just don’t like markets in uncertainty. If it’s going down, well, we make 6 percent on a little bit less. If it’s going up, we make 6 percent on a little more. But if there’s uncertainty, no one’s doing deals. Then we’re not happy.”

Perhaps, then, few brokers are happy with the seasonal chill in sales activity.

The number of apartment sales dropped 21.2 percent from the third quarter to the fourth, according to appraisal firm Miller Samuel, which issued its report for brokerage Prudential Douglas Elliman. This was an unusually steep drop, the report stated, as the average third-to-fourth-quarter drop was 6.7 percent over the past 15 years. (Sales also dropped 27.2 percent compared to the fourth quarter 2004.)

This fall-off probably won’t be imitated in the first quarter of 2006, Miller Samuel president and CEO Jonathan Miller told The Real Deal. Buys spurred by yearend Wall Street bonuses should add more zip to the housing market, particularly at its high end. In the last weeks of 2005, Miller said, his own firm appraised six different properties above $20 million for deals set to close in the beginning of this year. Miller added that the last quarter of 2005 saw a confluence of rising mortgage rates, mixed economic news, and a lingering laser-like media focus from the summer on the decline of the housing market in the city and nationwide.

But the Manhattan market did set a price-per-square-foot record in the fourth quarter, with the price rising 1.8 percent from the third quarter to $1,002 – the first time it’s tipped over $1,000, according to Miller Samuel. Both condos and co-ops in Manhattan also set price-per-foot records, with condos going up 0.6 percent over the previous quarter to $1,112 and co-ops topping $900 for the first time ever at $908, a 2.4 percent increase over the third quarter. Housing on the West Side of Manhattan had the highest price per square foot, Miller Samuel reported, at $1,072, while Uptown (basically, Manhattan above Central Park) had the lowest at $478 a foot. All areas of the borough saw increases over the third quarter in prices per square foot.

Still, prices dropped at the lower and higher ends of the market. Three-bedrooms experienced the sharpest average sales price drop, dipping 13.6 percent to $2,794,952, with studios as a distant second with a 5.1 percent drop to a $406,920 average sales price.

One-bedrooms, which represented 37 percent of the market share by number of sales, experienced a 1 percent bump upward to an average of $694,601. The sales price for two-bedrooms, which accounted for 39 percent of the market share in the fourth quarter, increased nearly 5 percent to $1,559,760.

Despite mixed indicators, the Manhattan housing market entered 2006 with plenty of steam. The average sales price increased 3.3 percent from the third through the fourth quarter to $1,187,404, Miller Samuel reported, and the median sales price went up 1.3 percent to $760,000.

But the drop in sales and a four-day increase from the third quarter in time on the market to 137 (up 41 days from the same time in 2004) appeared to aptly reflect a market in slowdown mode, one many months removed now from a summer where the average sales price of a Manhattan apartment cleared a record $1.3 million and time on the market was barely three months, on average, rather than well over four.

Simply put, in the fourth quarter of 2005, it was taking longer to sell what was available and activity was down. Brokers, by January, were adjusting accordingly, mainly by anticipating a stronger sales season for 2006.

“I don’t have a crystal ball and I don’t think anyone does,” said Hall Willkie, president of brokerage Brown Harris Stevens, “but I think we’re headed toward a lot more activity.”

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